Executives at Speedway Motorsports Inc. last week touted increased national broadcast revenue as the driving force behind steadier growth in recent years.
Lauri Wilks, SMI's general counsel, and Bill Brooks, the chief financial officer, discussed the publicly held company's strategy during an analysts' forecast conference held in Chicago. Concord, N.C.-based SMI owns six race tracks, including Lowe's Motor Speedway near Charlotte.
The company generated $1.32 per share last year on revenue of $376 million. The six-year national TV deal that sanctioning body NASCAR signed with Fox and NBC cushioned SMI and other track operators as the economy suffered the last two years, said Bob Simonson, leisure analyst at conference host William Blair & Co. Based on stock car racing's audience gains, the prospect for sustained TV rights-fee increases remains strong.
"Earnings growth should become predictable," Simonson said. Those gains are more valuable for SMI because the additional dollars come without any financial requirements for improvements at its tracks.
Brooks said TV revenue for the company was $67 million in 2001. That will gradually increase through 2006, when it rises to $141 million. During 2002, TV money made up 21 percent of SMI's revenue.
At the same time, the sport trails only the NFL in viewership among major sports leagues.
The first half of the current NASCAR season ended June 22. That portion of the schedule, televised by Fox, showed the network maintaining its audience levels from last year. NASCAR's fan base totals 75 million, with women accounting for 40 percent of the total.
Industry analysts say NASCAR's TV performance bodes well, since rival sports have endured sagging viewership in the midst of the Iraqi war and other factors this year.
Brooks says NASCAR will likely begin discussions on its next TV deal within two years. The current deal expires in 2006.
The heavy emphasis on TV money removes some of the pressure on SMI to constantly expand its seating capacity and sell more tickets. Ticket sales accounted for 50 percent of the company's revenue in 1997; this year, those sales will generate 38 percent.
Much of SMI's capital expenditures are still dedicated to track enhancements. For example, the company's Infineon Raceway outside San Francisco added 47,000 permanent seats and 16 luxury suites during the past year.
In Bristol, 52 suites and 43,000 grandstand seats — for a net gain of 10,000 — have been added. Next up is Las Vegas Motor Speedway. "People ask about acquisitions and construction [of speedways] all the time," Brooks told the analysts and investors. "That's not the only way to grow."
SMI went public in 1995. Its chief rival, International Speedway Corp., followed soon after. Since 1999, SMI's earnings have improved 36 percent while revenue is up 19 percent.
The forecast didn't resolve the fate of the NASCAR all-star race, held in Charlotte each May. The departure of series sponsor R.J. Reynolds Tobacco Co., a North Carolina-based company, after this season puts the event in jeopardy.
Officials at NASCAR have toyed with moving the all-star race from Charlotte in recent years. The tobacco sponsor was a strong advocate for the status quo. In mid-June, Nextel Communications Inc. signed on as title sponsor for NASCAR's top series. The $750 million, 10-year deal will likely spur a rotating schedule of tracks for the all-star race beginning in 2005, at the latest.
Losing the race would have a notable impact. This year, The Winston, as the all-star event is known, drew 150,000 fans at Lowe's Motor Speedway.
Additional schedule changes are unlikely at SMI. The company has long sought a second Winston Cup date for its Texas track, but NASCAR officials have refused the request.
Brooks said a pending lawsuit by an SMI shareholder against NASCAR — largely based on whether the sanctioning body reneged on an oral agreement to give Texas another race date — must be resolved before the company considers any schedule alterations among its properties.
The battles for top-tier NASCAR series events remain crucial for bottom-line success. SMI venues host 1,400 events a year, but 80 percent of that revenue comes from a handful of NASCAR events, Wilks said.
Erik Spanberg writes for The Business Journal in Charlotte.
